Natural Gas Spread December 2026 January 2027

Overview

The current December 2026 January 2027 NG spread is trading near minus 39 cents. This is as wide as the December versus January months relationship has been over the past 5 years --except for December 2022 versus January 2023.

Technically the current Dec 26  Jan 27 NG spread has negative momentum suggesting that January will still gain on December and that the spread will thus widen.
But, the spread has traded below the daily chart's lower bollinger band the past 2 sessions, thus suggesting that the spread is overextended to the downside at current. 

The Dec 22  Jan 23 spread shows that its value got to its widest in the final month of its life ( being during November 2022). The values we see from then offer us guidance as to how wide the current spread could get if it were to widen further from current value.  The values we see as possible support for December versus January are minus 45 cents and then minus 56.5 cents. Noteworthy from that year's spread is the fact that it was not really wider than minus 30 cents prior to the expiration month. Added to that narrative is the fact that the flat price for NG fell precipitously during the latter half of 2022---thus ending a bearish tilt to the forward curve.
On a rally for the current December 2026 January 2027 spread, we see upside resistance for December at minus 35.2 cents and then at minus 31.8 cents.

We also see a potential inverted head and shoulders spread developing on the daily April NG chart. The head of the formation lies at $2.775. The neckline lies at $3.190. Thus a break of 3.190 on the upside projects a possible move to the $3.60 area. That possible bullish formation and move would support the December 2026 January 2027 spread narrowing.
We see 3 things that could possibly support a rally/ bullish argument for NG. (1) we are coming upon storage injection season when demand picks up some (2) the global LNG concerns created by the Iran war seemingly have made US LNG supply more attractive (3) the large speculative short position in NG futures/options could ignite some short covering / buying.

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